Justin Cooke

December 4, 2013

“There is nothing wrong with change, if it is in the right direction” – Winston Churchill

Since starting this business, we’ve sold more than 500 sites and have worked with hundreds of websites sellers and buyers.

Many sellers have realistic expectations. Others? Not so much…

Last week we discussed the 6 different website buyer archetypes, but let’s flip the script and take a look behind some of the false assumptions sellers bring to the table.

1. “I spent $X,XXX on building this site, I need to get at least $X,XXX back on the sale.”

This is more common than you might think. Sellers have spent quite a bit of cash building something nobody wants or needs and is focused on recouping their costs in a sale. It’s not hard to find an example…

This was us.

The first site we’d ever listed on Flippa was a project we’d spent $4K on putting together and we were simply looking to recoup a portion of the costs.  The site was an order form that fed sales to a local SEO company, where we had an affiliate agreement in place.

This was a custom form for an obscure affiliate agreement without any traffic or revenue.  As you can probably guess, we didn’t receive any bids and the listing went up and ended without much attention at all.

You can check out that auction here.  (Be warned, it’s excruciatingly bad.)

Our first auction on Flippa failed hard but with good reason.  We thought because we’d spent some money creating the site that our investment inherently created value.

The value you create is not measured by how much effort or energy you put in but by how much others get out of that work. – Tweet This!

2. “This site should sell for more, there’s a TON of opportunity here!”

There’s an untapped multi-billion dollar industry just waiting to be conquered. Following my blueprint will easily take this site from $XXX to $XX,XXX per month. This site hasn’t even really been monetized…could you imagine if you just…

So you’re trying to build excitement and show there’s potential value in the site. We get it.

There are a couple of problems with this strategy:

Savvy buyers don’t buy on claims of potential. It’s true. You might fool some gullible buyers now and again, but by-and-large the investors you’re looking for (and this definitely holds true as you move up the value chain) aren’t going to be swayed by these claims. In fact, your more outrageous claims may actually lose you offers.

If you’re pulling out amateur hour they might think you’re being dishonest…or at least not forthright.

You may be selling yourself short. Let’s say you argue the site is in a niche and has a trajectory that could easily be taken from $1,000/month to $2,000/month within 12 months. For you, that would be a HUGE win – you’d be stoked with those results yourself.

Next, a potential buyer comes along that knows the niche and sees the “$2K/month within 12 months” claim and thinks, “Damn…if that were my site I would think that’s at the very low end. What’s wrong with this site that it can’t be built up faster than that?”

Unless you’re selling on a regular basis, you have no idea what’s going on in the mind of potential buyers. Avoid placing your own estimates on performance, lay out the current situation as plainly and directly as you can, and let the buyers come to their own conclusions about potential value.

They might just surprise you.

3. “Time commitment shouldn’t be an issue for a buyer.”

If there are tasks that need to be completed to keep the site running, this must be disclosed before purchase.  The reason is because there are different types of buyers with different interests, motivations, and goals.

  • “Newbie Norms” – Wants to make sure he can do the work required.
  • “Lifestyle Larry” – Wants to know if the work and time required on the site will match his lifestyle.  (Will he be taking US-based calls in Bali at 4am?)
  • “DIY David” – Wants to spend some time tinkering and messing around with the site himself to improve rankings, revenue, etc.
  • “Portfolio Paul” – Wants to know the cost to replace or outsource that work. Not looking for a time commitment, so he will want a discount on the price to compensate.

More about buyer motivations here.

Sellers often downplay the work required on the site either because they’re looking to avoid a lower valuation or because they’re embarrassed by how little they value their time.

They forget that not everyone’s a Portfolio Paul. A guy like DIY David may appreciate and even look forward to tinkering with the site to see how they can improve, outsource, or automate the process.

Failing to mention the time you spend on the site may cause Portfolio Paul to back out of the deal and not seem an interesting enough project to a DIY David.

Turn this seemingly negative issue into a selling point, not a sticking point. – Tweet This!

4. “This site will continue to earn this each month…I guarantee it.”

No matter how confident you are the site will crush it in future months/years I can’t help but roll my eyes and sigh in frustration when I see sellers offering these types of promises or guarantees.

This type of guarantee is impossible and, more importantly, unenforceable.

No GuaranteesYour supplier could raise prices and cut your profit margins tomorrow. Google could punish the site for links you never built next week. Competitors could start competing for AdWords keywords, demolishing your paid traffic strategy next month. That’s not even mentioning all of the potentialities you haven’t even considered.

A seller that’s making these types of promises is hoping to build trust with the buyer, but they’re actually doing the exact opposite.

Any buyer worth his/her salt will see right through these false assurances and sense your lack of experience. Or worse, they will assume you’re being sketchy and they’ll pass on the site altogether.

You’re better off accurately reporting exactly what you’ve done, where the site is today, and being clear that there are no guarantees. Most buyers understand the risk and this puts you both on the same page and sets clear expectations.

When we see these types of promises from our sellers, it’s clear what we need to do – We need to walk away.

5. “I can sell anonymously.”

I can see the appeal of sitting back and quietly raking in profits from your sites without having to talk to customers. That’s the promise of many online gurus who promise passive income with the push of the easy button.

Unfortunately, that’s just not the way business works for most of us.

This is a common tactic of scammers who rotate in and out of Flippa usernames, create fake Facebook or Twitter profiles for each new online persona, etc.

As a “real” person, the easiest way for you to differentiate yourself is to put yourself out there. Stand behind what you’re doing and you’ll get an instant credibility boost from anyone looking to buy your sites.

When starting out, Joe and I both linked to our LinkedIn profiles and made ourselves available via email, Skype, etc. You knew exactly who you were dealing with.

Even today, sellers looking to list their websites for sale on our marketplace are required to submit personal identifying information before they can sell with us.  If they don’t pass this most basic check then they don’t get to join the club – that’s it.

I mention this point last, but it’s probably the easiest thing you can do to separate yourself from the herd. People buy from people they know, like, and trust, and putting yourself out there is the first step.

This carries well beyond the business of selling sites and into the rest of your business as well. Joe and I learned the hard way (through some horrible experiences meant for another post) that chasing after deals or partnerships with anonymous people with lofty goals is an exercise in futility.

Want an easy win to differentiate your business from the competition? Quit trying to be anonymous, put yourself out there, and pick up the phone!

Sellers Who Get It Right

If you’re planning to sell your site in the near future and want brokers and buyers to take you seriously, I’d suggest:

  1. Acknowledging the valuation is based on value created, not time or money spent creating the site.
  2. Selling on potential is a weaksauce position that may even hurt you with real buyers.
  3. Don’t sweat sharing the time you spend working on the site. You might be surprised to find some buyers view that as opportunity.
  4. You can’t guarantee shit. Trying it shows you don’t know what you’re talking about and will turn buyers away.
  5. Site buyers and (more generally) customers buy from others they know, like, and trust. Putting yourself out there is the first step down that path and an easy differentiator from the keyboard warriors.

Did any of these points surprise you? Anything we’ve missed that you think site sellers have all wrong?

What changes have you made to your selling position that improved your valuation and appealed to more buyers?

Let’s swap stories in the comments.

Photo Credit: Paul Hocksenar – Flickr


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Discussion
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  1. Kevin says:

    Good article, and reflects my thoughts exactly when I’m evaluating businesses for sale. BTW, love the Men’s Warehouse jpg, blast from the past.

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